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Warren E. Buffett was his usual folksy self Tuesday night at a fundraiser for Sen. Hillary Rodham Clinton (D-N.Y.) as he slammed a system that allows the very rich to pay taxes at a lower rate than the middle class.
Buffett cited himself, the third-richest person in the world, as an example. Last year, Buffett said, he was taxed at 17.7 percent on his taxable income of more than $46 million. His receptionist was taxed at about 30 percent.
Buffett said that was despite the fact that he was not trying to avoid paying higher taxes. "I don't have a tax shelter," he said. And he challenged Congress and his audience to see what the people who "clean our offices" are taxed, to loud applause.
You might wonder how Mr Buffett managed such a low tax rate. Most likely, it arose because corporate dividends and capital gains are taxed at only 15 percent. But the corporate income that funded those returns was already taxed at the corporate level, where the tax rate is 35 percent. Mr Buffett seems to be ignoring the first round of taxation. ...
Why is it so low? I can think of at least four possible ways investors like Mr Buffet can keep their taxable income, as opposed to their true income, low:
1. They hold stocks that pay minimal dividends.
2. They avoid realizing capital gains.
3. They hold some of their portfolios in tax-free municipal bonds.
4. They give appreciated assets to charity, getting a deduction for the current market value without ever having to realize and pay tax on the capital gain.
Notice that raising tax rates, as Mr Buffett seems to want to do, would not much affect any of these tax avoidance strategies. Even if tax rates were raised substantially, the tax savvy Mr Buffet probably wouldn't be paying much in taxes as a proportion of his wealth or as a proportion of his true income.
i disagree that he ignored the corporate taxes and should have added them to his taxes.
for example, he owns a shoe company that produces comfort sandals for women... the estimated corporate taxes that the shoe company will have to pay, is incorporated in to the wholesale price of the shoe....thus, it is the consumer that pay's the company's taxes, or corporations taxes, NOT the stockholders, could be argued successfully.
care
i disagree that he ignored the corporate taxes and should have added them to his taxes.
for example, he owns a shoe company that produces comfort sandals for women... the estimated corporate taxes that the shoe company will have to pay, is incorporated in to the wholesale price of the shoe....thus, it is the consumer that pay's the company's taxes, or corporations taxes, NOT the stockholders, could be argued successfully.
care
Who ultimately pays for a corporate tax - the shareholders or the consumer - is dependent upon the elasticity of the demand curve, i.e. its slope. In other words, the less price responsive demand is to changes in price, the more the consumer will pay the tax - think cigarettes and gas - and the more responsive demand is to change in the price, the more the shareholders will pay. In reality, it is somewhere in between.
Buffett is, of course, the world's greatest investor.
http://www.washingtonpost.com/wp-dyn/content/article/2007/06/27/AR2007062700097.html
And a rebuttal from Greg Mankiw
http://gregmankiw.blogspot.com/2007/06/mr-buffetts-tax-bill.html
Let me see if I have this right.... Companies added the amount of projected corporate taxes to the sale price of merchandise and services they render, is that your claim?
Now I am no tax expert but as I understand it, the TAXES they pay are based on how much they MADE. So it would seem to me, that charging MORE to cover future taxes would in fact cause MORE taxes to be taken from the Corporation.
With the top producers already paying 50% (or more) of their income in taxes - how much more do you feel they should pay?
The companies know what their taxes will be - they simply raise the price of their goods to cover
The tax is based on their profit not their gross sales
When the cost of doing business goes up, the companies will find a way to cover the expense - not at the expense of their bottom line
That is not necessarily correct.
Sales tax is taxed on revenues, for example.
Also, the effect of a tax on corporations depends on the slope of the demand and supply curves.
Eventually, all corporate taxes are borne by people. However, who are effected by the tax differs.
We are talking about corporate income taxes
The folks who buy their products and services pay the taxes
Libs will never understand when they attack business and add to the cost of doing business - it is a tax on the people
Correct, and this is what I said initially, but Toro does make a point regarding the mark up of the product to cover the taxes....if the consumer rejects the higher cost of goods, and sales slow down because the market rejects the higher price value of the product, PERHAPS, and i say this gingerly, perhaps the stock holders could feel an effect of this, through lower earnings.
I gave him the benefit of the doubt, but in general, I agree with you, the consumer of the corporations product, ultimately pays the corporate tax.
good morning rsr!
care
No, the people will feel the effects
If the cost of doing business goes up, the company only has a few ways to counter the increeased cost
Raise the price of their good and services
Relocate the company elsewhere
Layoff employees
In the end the people are the ones who pay - something the left has not learned yet
And where is your "good morning" to me?
I agreed with you rsr....but there is a slight, very slight chance, the stock holders could get an effect from this, BUT MORE THAN LIKELY, they will NOT, and the consumer will bear the brunt of these taxes.
And I am not sure you are right about Democrats not understanding this... I have always understood that the corporation's taxes are paid for by the consumer....mainly because I worked for corporations for over 20 years and that is how we did business, we marked up the product to accomodate the corporate taxes in to the price of goods, so that we would come out with a "certain" amount in earnings, to beat the previous years earnings, put simply.
Now, let me ask you this, are you FOR the Fair tax or sales tax, that eliminates the income tax?
Because, in essence, corporate income taxes are a sales tax, which the consumer buying the product, is ultimately paying the taxes....
IF, a sales tax on goods is acceptable to you, the "consumer" of the product is paying the taxes on the product, then the corporate tax should not bother you....because it is in essence, a sales tax on a product, which the consumer is paying, not the general public who never wanted to buy that product in the first place!
Care
Care, good morning
Trust me, Dems do not get it
They are at constant war with US corporations. Big oil, big tobacco, Rx companies, Wal Mart, and Microsoft
With the exception of the porn industry - I know of no other industry they have not attacked
YOU were born a smart ass, weren't you?
http://www.responsiblewealth.org/
This organization will prove your silliness wrong in ten seconds.
There are people of all economic levels who agree with spreading the responibility for the nation acrossed all econimic levels.
Im so tired of the lies and distortion being spread instead of the truth about what each side stands for.
The companies know what their taxes will be - they simply raise the price of their goods to cover
The tax is based on their profit not their gross sales
When the cost of doing business goes up, the companies will find a way to cover the expense - not at the expense of their bottom line
Taxes are NOT part of what they get to claim are buisness expenses. If they raise the price OVER what it costs to make the item and advertise and pay employees, you know to cover taxes, then Profit GOES UP as do Taxes. The only control they have on the tax in question is in deciding what to give as dividends. And that doesn't hurt them because the tax comes out of the Dividend.
If I give you 10 dollars and the Government takes 3.50 of it, it didn't cost me a dime. It cost you.
